First of all, let us reassure you that if you are one of Moseley & Associates' clients, we take great pains to minimize your changes of being audited. Our tax preparation process includes multiple levels of review to catch many common mistakes and omissions Further, we work with you to make sure you understand your record-keeping requirements so that even if you are audited, you will come through with less stress and anxiety.
So what are your odds? Overall, about 1% of returns are audited. Of course this risk varies greatly. One factor is income level: the higher your income, the greater your chances. Wealthy individuals with more than $1 million in income stand a 12% chance of being examined.
The IRS is very efficient about which returns they select to audit. Although a very small proportion are chosen completely at random, most are selected based on criteria that indicate a higher probability of a problem. Some returns are selected because of reporting mismatches that arise when a taxpayer either omits or misstates a figure that was separately reported to the IRS. For example, the IRS is very quick to catch problems with W-2 or 1099 income. Other returns are selected when the return is out of line with national averages for that income level or when other characteristics of the return are associated with tax cheating.
In a future blog post, we'll look at some of these other reasons why the IRS might decide to give your return a second look and how Moseley & Associates can help you stay on the straight and narrow.
For more information on this topic here's a link at Kiplinger.com: